The Vale of Glamorgan Council

Scrutiny Committee (Corporate Resources): 10th December 2013

Report of the Managing Director

Initial Capital Programme Proposals 2014/15

Purpose of the Report

1. To advise Scrutiny Committee of the revised Capital Programme for 2013/14 and to submit for consultation the Initial Capital Proposals for 2014/15.

Recommendations

1. Scrutiny Committee considers the Initial Capital Budget Proposals for 2014/15 and recommendations from other Scrutiny Committees and forwards its recommendations to Cabinet.

2. That Scrutiny Committee notes the following changes to the 2013/14 Capital Programme:

· Increase the provisional Flying Start capital budget by £131,520, following approval by Welsh Government of additional funds, the amended budget of £544,520 will cover the following schemes Ladybirds at Holton School, Parenting Suite at Holm View, Flying Start Co-location and Flying Start Family Centre.

· Increase the Capital Programme by £650,000 for a scheme at Cross Common Road Bridge to be funded from a revenue contribution.

· Increase the Housing Revenue Account Capital Programme to reflect a £600,000 contribution from revenue to fund works with void properties.

· Include a £10,000 budget for S106 works at Belle Vue Park in the Capital Programme

· Carry forward £146,000 for Oakfield School new entrance and reception area, to 2014/15 when the funding will be used as part of the 21st Century Schools funded proposals for Ysgol Gwaun y Nant and Oakfield Primary School.

Reasons for the Recommendations

1. To allow full consultation on the future Capital Programmes.

2. To amend the 2013/14 Capital Programme.

Relevant Issues and Options

2013/14 Capital Programme

2. Appendix A details financial progress on the Capital Programme as at 30th September 2013.

Director of Learning and Skills

3. Oakfield New Entrance and Reception Area - Carry forward £146,000 of funding for Oakfield new entrance and reception area to 2014/15 when the funding will be used for pitches, external play and woodland school facilities as part of the 21st Century Schools funded proposals for Ysgol Gwaun y Nant and Oakfield Primary School.

Director of Social Services

4. Flying Start Grants - Following approval from Welsh Government additional funding has been made available to Flying Start in 2013/14, a provisional budget of £413,000 is been included in the Capital Programme and it is now requested to increase this by £131,520. The revised budget £544,520 will cover the following schemes:

· Ladybirds provision at Holton School £193,250, £20,000 for equipment was already built into the Capital Programme for 2013/14. The provision will consist of a room for childcare, toilet and office facilities a new entrance and an outside space.

· £40,000 to fund a Parenting Suite at Holm View this will consist of a creche, a room for group working as part of the parenting classes and also a preparation room.

· Funding of £122,364 for the Flying Start Family Centre; this will fund a Parenting Room at the Gladstone Road site.

· Funding £168,906 for Co-location project at Skomer Road office.

5. Rondel House Boiler Replacement - Emergency Powers have been used to approve the virement of £40,000 from Hen Goleg Boiler Replacement and Heating Works to Rondel House Boiler Replacement to ensure that the scheme was progressed in 2013/14. The sum was insufficient to fund a boiler replacement at Hen Goleg and a bid has been put in for additional funding for the replacement at Hen Goleg works as part of the 2014/15 budget process.

Director of Visible Services and Housing

6. Flood Risk Management - £750,000 was approved as part of the 2013/14 Capital Programme for various schemes to address flooding and drainage issues. The Highways and Engineering department have proposals for a number of schemes to deliver from the £750,000 Flood Risk Management funding. Whilst a small number of schemes are progressing including Llancadle, Old Wick Road and highway drainage improvements, the full details of these proposals will be the subject of a separate report by the Director of Visible and Housing Services.

7. Cross Common Road Bridge - Cabinet has been requested to increase the Capital Programme by £650,000 to address the outcome of a feasibility study which is considering options for the future of Cross Common Road Bridge, this will be funded from a revenue contribution. A report detailing this feasibility study will be presented to Cabinet shortly.

8. Housing Improvement Programme - Increase the Housing Revenue Account Capital Programme by £600,000 to fund work to be carried out on void properties; this will be funded from an increased contribution from revenue.

9. Welsh Housing Quality Standard (WHQS) works for Sheltered Housing- As approved by Cabinet on 21st October 2013 (minute C2058) funding of £150,000 shall be brought forward from the Capital Programme in 2014/15 to progress WHQS works for sheltered housing. This additional funding will enable completion of the Fairoaks site within this financial year and would have benefits in terms of tenants’ satisfaction and preliminary costs associated with site set up. There were 22 additional properties that would need to be upgraded to complete the improvement works in the Fairoaks area.

Director of Development Services

10. S106/Belle Vue Park - Cabinet has been requested to include £10,000 in the Capital Programme for Section 106 funding has been awarded to a project at Belle Vue Park. This entails the replacement of an original water drinking fountain in the park; improve recycling facilities and a contribution towards an outdoor gym.

Variance between Actual Spend to date and Profiled Spend

11. Cabinet have previously agreed that further information would be provided where schemes have a value of over £500,000 and show a variance of 20% or more between actual spend and the profile. The following schemes meet this criteria:-

· WHQS Works - As outlined in previous capital monitoring reports there is always likely to be a variance in the WHQS expenditure as the extent of works required in a property is not known until the works commence. During September, works on central heating/boilers and roofing works were behind profile, whilst asbestos management costs have exceeded the initial profile.

· Learning in Digital (Wales) Grant - A large order £470,000 was placed during September which will rectify the discrepancy between the profile and actual expenditure and ensure the grant is fully spent by the grant deadline in December 2013.

· Ysgol Nant Talwg, Barry - The variance between actuals to date at the end of September and profiled budget is due to a delay is issuing a certificate of payment. All required information is now in place and a payment was made in October which brought the actuals to date in line with the profiled expenditure.

· Vehicles Renewal Fund - Expenditure is slightly behind profile due to second hand vehicles being purchased in year and some items of expenditure being delayed pending the outcome of decisions regarding future revenue services.

2014/15 to 2018/19 Capital Programme

12. The Welsh Government (WG) announced the provisional 2014/15 General Capital Funding, on 16th October 2013. The 2014/15 capital settlement represents a £246,000 (4.7%) increase in funding over last year's allocation; however because this amount includes the reinstatement of £280,000 transferred to supported borrowing for the Housing Revenue Account in 2013/14, the actual position for the Council is a reduction of £34,000 which represents a 0.61% cut. The indicative amount provided by WG suggests that capital funding will be maintained at this level for 2015/16. This has been reflected in the proposed Capital Programme 2014/15 to 2018/19 which is shown in the table in Appendix B.

13. Whilst the indicative amounts have been utilised in 2014/15 and 2015/16, for the purposes of this programme, the assumption of a 10% cut each year has been assumed in 2016/17, 2017/18 and 2018/19. In line with the financial strategy, the Council will mitigate the deteriorating situation by looking to progress only those schemes which are deemed to be a key corporate priority, whilst also seeking to gain assurance that such schemes are delivered on time and within budget.

14. Cabinet, on 13th February 2008, approved that the Director of Resources in consultation with the Cabinet Member responsible for Finance, be given delegated authority to transfer supported borrowing between General Fund and the Housing Capital budgets as appropriate. Due to the uncertainty regarding the future of Housing Subsidy, the Authority does not intend to seek a £280,000 transfer in each year of the capital programme as had been previously assumed; unsupported borrowing in the Housing Revenue Account has been increased accordingly.

15. The Major Repairs Allowance (MRA), which is the grant that provides capital funding to the Housing Revenue Account (HRA), for 2014/15 has not yet been announced by the Welsh Government. Cabinet will be advised once the announcement is made. An assumption has been made in Appendix B that the grant will continue at the current allocation of £2.8 million in 2014/15 and throughout the period of the Capital Programme.

16. In addition to external funding, the Council will finance part of the Capital Programme from its own resources, e.g. capital receipts and reserves.

Capital Bids 2014/15 to 2018/19

19. Capital bids were invited for return by 30th September 2013 and the number of bids received was reduced from the high volume in the previous year. This reduction reflects that the Capital Programme had been set to 2017/18 following the budget review that took place as part of the 2013/14 budget process. Departments were requested to rank their own bids in order of importance before submission, and bids from each Department were forwarded to the Corporate Asset Management Group (CAMG) for evaluation.

20. The CAMG used the criteria set out by the Budget Strategy; the bids were prioritised in terms of their corporate priority and the risk they pose to the Council if they are not pursued. Following this the prioritisation of bids was reviewed by the Budget Working Group. The risk assessment element was undertaken in line with the Council's Corporate Risk Management Strategy as follows:

Possible Impact or Magnitude of Risk

Catastrophic

MEDIUM

MEDIUM/HIGH

HIGH

VERY HIGH

High

MEDIUM/LOW

MEDIUM

MEDIUM/HIGH

HIGH

Medium

LOW

MEDIUM

MEDIUM

MEDIUM/HIGH

Low

VERY LOW

LOW

MEDIUM/LOW

MEDIUM

Risk Matrix

Very Unlikely

Possible

Probable

Almost Certain

Likelihood/Probability of Risk Occurring

21. Taking into account the nature of capital schemes, the following criteria were applied to assess corporate priority:

Corporate Priority

Score

Commitments and areas where the Council has no control over the expenditure, e.g. contractual and legal commitments, absolute minimum statutory service, taxes, etc.

3

Very high priority (publicly announced commitment e.g. items included in the Community Strategy, Corporate Plan etc.)

2

â€œInvest to Saveâ€ and preventative expenditure

2

Statutory expenditure above the absolute minimum and other priorities

1

22. Only those schemes assessed as corporate priority 1 or medium risk and above are included in these proposals. The bids that did not meet these criteria or were excluded from consideration because funding has already been allocated are set out in Appendix C with a reason for their exclusion from the Capital Programme. These have not been put forward for inclusion in the 2014/15 to 2018/19 programme.

23. In addition to bids meeting the criteria for inclusion in the Capital Programme, there have been a number of changes approved by Cabinet since the final budget proposals in February 2013 that impact on the Capital Programme, these changes include amendments to the School Investment Strategy, budgets carried forward, an increase to the Schools ICT loan scheme and the new School Capital Loan scheme. Also reflected in Appendix B are proposed changes to the Housing Revenue Account Business Plan.

Next Steps

24. The estimates have been submitted to each Scrutiny Committee for consultation. Scrutiny Committee (Corporate Resources) is the lead Scrutiny Committee and will consider both the Initial Capital Programme Proposals and the recommendations that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 13th December 2013.

25. Each Scrutiny Committee will be asked to first consider the indicative capital proposals as shown in Appendix B. They then may make recommendations for changes. If they wish to make a change, the reason for this needs to be recorded in order to assist the Cabinet and the Cabinet Budget Working Group draw up the final proposals.

26. Managers will be asked to revisit the schemes included in Appendix B and to confirm final costs and spend profile prior to the final proposals being presented to Cabinet, which will be no later than 24th February 2014.

27. Cabinet’s final Capital Programme proposals will be considered by Council on 5th March 2014.

Resource Implications (Financial and Employment)

28. The total net capital expenditure of the proposed programme in Appendix B, over the 5 years, is approximately £102m.

29. If the schemes shown in Appendix B are approved, the effect on General Fund useable capital receipts will be as shown in the following table.

General Fund Capital Receipts

£'000

Anticipated Balance as at 1st April 2014

7,940

Anticipated Requirements – 2014/15

(2,656)

Anticipated Receipts – 2014/15

885

Balance as at 31st March 2015

6,169

Anticipated Requirements – 2015/16

0

Anticipated Receipts – 2015/16

0

Balance as at 31st March 2016

6,169

Anticipated Requirements – 2016/17

(2,237)

Anticipated Receipts – 2016/17

0

Balance as at 31st March 2017

3,932

Anticipated Requirements – 2017/18

(0)

Anticipated Receipts – 2017/18

0

Balance as at 31st March 2018

3,932

Anticipated Requirements – 2018/19

(0)

Anticipated Receipts – 2018/19

0

Balance as at 31st March 2019

3,932

30. In line with the overall strategy and specific suggestions proposed by the Budget Working Group (BWG), in order to resource the Capital Programme, reserves will be utilised over the period of the Capital Programme 2014/15 to 2018/19.

31. The Project Fund will be used to fund schemes assessed on an invest to save basis, and in certain circumstances business critical schemes may also be funded from this reserve with the prior approval of the Director of Resources. A balance of £2m will be retained as a balance on this fund. The projected usage of this reserve over the period of the Capital Programme is shown below;

Project Fund

£'000

Anticipated Balance as at 1st April 2014

4,217

Anticipated Requirements – 2014/15

(1,754)

Anticipated Receipts – 2014/15

402

Balance as at 31st March 2015

2,865

Anticipated Requirements – 2015/16

(450)

Anticipated Receipts – 2015/16

100

Balance as at 31st March 2016

2,515

Anticipated Requirements – 2016/17

(400)

Anticipated Receipts – 2016/17

60

Balance as at 31st March 2017

2,175

Anticipated Requirements – 2017/18

(100)

Anticipated Receipts – 2017/18

60

Balance as at 31st March 2018

2,135

Anticipated Requirements – 2018/19

(0)

Anticipated Receipts – 2018/19

0

Balance as at 31st March 2019

2,135

32. The above forecast balances need to be seen in the context of significant pressures for spending which are not yet included in the Capital Programme. These include the backlog of school, highways and buildings improvements.

Sustainability and Climate Change Implications

33. The bids must also be evaluated for Sustainable Development. The four areas of Sustainable Development to be considered are:

· Living within environmental limits

· Ensuring a strong, healthy and just society

· Achieving a sustainable economy

· Promoting good governance.

34. Sustainability checklists will be requested from Project Managers for each of the proposed bids included in Appendix B. These will be reviewed by members of the Sustainable Development Working Group, with a view to ensuring that wherever possible the four sustainable targets are addressed. The results will be included incorporated into the Final Capital Proposals report in February 2014.

Legal Implications (to Include Human Rights Implications)

35. The Council is required to show that capital expenditure is covered by identified resources.

Crime and Disorder Implications

36. The obligations of the Council with regard to Section 17 need to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

37. Additional finance improves the Council’s opportunities for assisting disadvantaged members of society.

Corporate/Service Objectives

38. Contributes to the corporate priority of Community Leadership by the provision of sound financial management.

Policy Framework and Budget

39. This report follows the procedure laid down in the constitution for the making of the budget. The 2014/15 budget proposals will require the approval of Council.

Consultation (including Ward Member Consultation)

40. The Management Team and all Scrutiny Committees have been consulted on the proposals.

Background Papers

Bids received from departments

Correspondence received from the Welsh Government

Contact Officer

Gemma Jones, Accountant

Officers Consulted

The following Officers have been consulted on the contents of this report:-